Over the course of many years, we have developed a method and analysis model for providing transparency into the hedging practices of market makers using publicly available exchange data. The proprietary analysis driving Institutional Insights™ takes advantage of that transparency to create organized intelligence not found elsewhere in the investment universe.
At the end of each trading day, data is collected consisting of the trading and hedging practices of market makers and institutional traders around the world. That data is fed into an analysis system that has been maintained and kept current for over two decades. Detailed statistical analysis is then completed not only on the current day's data but also in conjunction with historical data for deeper and more meaningful probability mapping.
The result is a specific price range forecast for each individual stock or ETF in the population. Keeping in mind that these forecast represent a summation of the collective judgments of all the market makers and institutional traders around the world that trade that security.
Included in each forecast is an expected price range above the current day's price as well as a price range below the current day's price. For the majority of issues on any given day, the price forecasts are near-evenly centered above and below the current price of the underlying stock or ETF. This indicates that the market making community has determined that there are equal probabilities of that particular ETF's price heading higher or lower in the near term. Our definition of "Near term" is three weeks up to three months.
On occasion, however, the current price of a particular stock or ETF begins to trade at the low end of the forecasted range, signaling a shift in the market makers' expectation about that security. The institutional community is indicating that the ETF price will move higher in the near term to match their price forecast.